Is Digital Killing the Luxury Brand?

It’s worth keeping one undeniable fact in mind: Social media can disseminate the information, but there are still only an elite few who can afford the high-end goods.

Derek Lam learned this, ironically, when it partnered with eBay earlier this year to create a less-expensive line that was actually crowdsourced: Users were given a selection of different garments and voted on which ones would be produced. Derek Lam’s CEO, Jan Schlottmann, says it was an experiment to see “how we can use the immense traffic and technology of eBay to find out more about our consumer.” Traffic to the company’s website increased, Schlottmann says, and e-commerce sales doubled. But those sales still only made up 1.5 percent of the company’s total—and most of those sales were of discounted items or accessories. “It’s still a harder sell to sell a $1,500 dress online,” says Schlottmann.

Which brings us back to the problem. If brands’ websites and social net offerings are geared toward less-expensive lines, is this hurting their exclusive images? If they don’t decide soon, the people—the bloggers, the tweeters—will decide for them. To quote another rapper, Theophilus London, “The clothes don’t make the man; it’s the man that makes the clothes.”

But maybe the notion that a brand could ever truly own its image was always an illusion. “You can tear magazine ads out, cut them up, paste them on things—they’re interactive,” says MediaLink’s Salomon, “and they reach anyone at a nail salon getting a $15 manicure. What does that say about controlling your message?”

High-end fashion brands have a problem. Let’s call it the “Kreayshawn quandary,” after the young Bay Area rapper made famous by the Internet and her hit song “Gucci, Gucci,” which has gotten over 16 million views on YouTube. Sample lyrics: “Gucci, Gucci, Louis, Louis, Fendi, Fendi, Prada...the basic bitches wear that shit so I don’t even bother.”

It may have taken a rapper to say it best, but the message has been clear for a while: Luxury designers are losing their cachet. And the problem is only being intensified by the medium that made Kreayshawn a star.

Just a few years back, most high-end fashion brands distrusted all things digital. Their fear was understandable. Digital is democratizing; it’s about accessibility. The brand image for high-end fashion is all about inaccessibility: Keep the masses out so that the people who can afford to buy their way in feel they’re exceptional.

Then those haute couture designers who’d shunned new media took some hits—thanks to the recession—from price-slashing department stores and discount websites, at the same time they began paying attention to changing retail statistics. And an industry obsessed with being ahead of the curve realized it was dramatically behind.

“A couple of years ago, we were in Italy, and we met with [Donatella] Versace and [an executive at] Armani…and they were like, ‘Digital, whatever,’” remembers the CEO of an agency that deals with several luxe brands. “Now it’s, ‘How can I do it?’ There’s been almost a cataclysmic shift.”

“There is a sense of urgency associated with digital platforms,” adds Vera Wang president Mario Grauso. “We haven’t so much shifted [advertising] resources, but rather we have allocated additional resources to build, support, and promote our social media platforms.”

Now that they’ve embraced digital, though, high-end brands find themselves having to face the fears that kept them from it for so long. Digital isn’t as easy to do as some of them would like to think. And if the brands do it badly, the democratizing effect of digital can backfire on them, further eroding the aura of exclusivity that defined them for generations.

The reasons for going online are, as most other industries already know, compelling. Eighty percent of people with an income of over $250,000 are social media users according to Unity Marketing research, and 50 percent have used social media to learn more about a brand or see new products. Data from management consulting firm L.E.K. Consulting shows that those earning more than $150,000 are the only people spending more than they did before the recession. And a 2011 Digitas study notes over the next decade digitally entrenched millennials will become the next major luxury buyers—and should therefore be targeted now.

From a revenue standpoint, it makes perfect sense. Many luxe fashion brands have huge beauty and accessories businesses, and make their real money not from couture but from shoes, handbags, jewelry, makeup, and so on. And what better place to advertise and sell a $23 nail polish than online?

So brands from Versace to Hermes to Chanel have delved into Facebook, Twitter, and other social network sites. They’re blogging, live streaming runway shows, introducing mobile apps (Vera Wang’s, in development, will be a “wedding design and inspiration app” for the iPad), running cross-platform campaigns, revamping websites with a new focus on e-commerce, and jumping into mobile commerce—doing, in other words, pretty much the same things other categories have been doing for years. New York’s Mercedes-Benz Fashion Week—where former clipboard-bearing publicists are suddenly all hauling iPads—has seen a flurry of related digital efforts, such as the live streaming of some 30 shows at YouTube.com/liverunway.

Of course, not all labels have been laggards. Designers including Diane von Furstenberg and Ralph Lauren “got” digital early, and for younger brands like Prabal Gurung, it’s been a touchstone. In May 2009, Demi Moore tweeted a picture of herself wearing a dress from Gurung’s first collection; her husband Ashton Kutcher retweeted it, and Gurung immediately had 500 followers (he now has 31,000). “I said, ‘Here’s the power,’” Gurung remembers.

But the question of how brands that pride themselves on exclusivity—indeed, that depend on it—can keep their brand image from taking a turn for the tawdry in a digital universe is one luxury designers can’t afford to ignore. The watering down of a brand can do real damage, as Christian Louboutin is finding out with its red-sole shoes, which have lost their “it” status thanks to countless down-market imitators. (Worse, Louboutin is currently in danger of losing its trademark for that distinctive red color.) Anytime a brand’s “personality” is perceived to have changed for the worse, it’s quickly reflected in sales. This category, almost more than any other, targets a specific audience. When sales clerk Susie in Iowa saves every penny to buy a designer bag, and her friends follow suit, Hollywood stylists begin to think twice about outfitting the star of the moment with it, and a bit of the designer’s image falls away.

“We see brands fight over the number of friends on Facebook and judge their initiatives based on number of ‘likes,’ but who are those friends?” asks Ferdinando Verderi, creative director at WPP’s Johannes Leonardo, an agency whose clients include Chanel. “Are those people luxury brands ever wanted to talk to?”

The reality, of course, is that brands are being watered down whether they like it or not. In some cases, they’re even speeding things along, as bottom-line concerns push them into big-box collaborations and less expensive line extensions. Image still counts, and some companies aren’t navigating their dive into digital as carefully as they should be.

Fabien Baron, the renowned art director and founder of brand strategy firm Baron & Baron—clients include Calvin Klein, Burberry, Balenciaga, and Hugo Boss—notes that “a lot of brands say, ‘We need a film [to put online]—something quick, [like] a behind-the-scenes.’ And they do it over-the-shoulder, poorly produced, and the quality of the job is not as high as the print ad. So what starts to happen is that they have a message that is diluted, even from the brands themselves.”

The solution, he says, is to make brands live the same luxe life digitally that they do in print or on billboards. (The Baron way: a meticulously edited aesthetic featuring clean and minimal art direction and productions.)

Some brands that claimed they were late to the digital game because the technology didn’t allow for the kind of refined presentation they wanted no longer have that excuse, especially with the rise of tablets with their brighter, sharper, and more attractive displays. And digital houses have gotten better at what they do, and thus more flexible, so that many high-end brands are able to get truly customized online content.

And there are some luxe fashion companies approaching the Internet with real care.

Take Bottega Veneta. Much of its allure is the actual feel of, say, its $3,800 handcrafted bags, so the challenge is to recreate that feeling online. “Because so much of Bottega is made by hand, there’s this artisanal sensibility,” explains Trey Laird, chief executive and creative officer of agency Laird+Partners, “so we started documenting the process.” The result are films called “The Art of the Collaboration” that are conversations between Bottega creative director Tomas Maier, Tina Barney, and Annie Leibovitz that ran on the Bottega site and then rolled out to Facebook.

LVMH, the owner of brands like Louis Vuitton, Givenchy, and Fendi, has built on its brands’ strengths. Its online publication, Nowness, is an elite look at luxury fashion and art, featuring lots of people you don’t know and will never run into, since you don’t have access to V.I.P. lounges in velvet-roped clubs. Last year, Chanel pulled off a sensational runway show for the jet set in Saint-Tropez, which it streamed online at French social media fashion site Ykone. Exclusive? Absolutely. Most watching online could only dream of arriving at a French beach town (or anywhere else, really) in a speedboat while dressed head to toe in expensive ready-to-wear clothes, as the models did. It’s the rarefied world of Chanel, brought to you by the rarefied world of Chanel.

Over at Burberry, its online project Art of the Trench—a photo-sharing website launched in late 2009 that features people wearing Burberry trench coats and is still going strong—is a brilliant way to invite consumer engagement while retaining control over the brand image. Although it showcases specially commissioned professional photography, it allows for at least a little bit of that digital democracy, as users are able to submit their own pictures.

Art of the Trench “was a turning point for the industry,” says Dee Salomon, a senior partner at advisory firm MediaLink who’s a veteran of Style.com, and former head of marketing for Donna Karan and Anne Klein. “[Companies] realized you could do things that reached a lot of people, but still had an elegance and were still on brand.”

One tactic, says James Gardner, CEO of CreateTheGroup, is giving consumers special privileges. Burberry, he points out (a client), does this by giving inside access like its own live stream of its fashion show on Sept. 19 that will let consumers “sit” in the front row.

Other brands are also realizing the Web can actually help them maintain control over discounting and the dissemination of their product and look, which is why an increasing number of luxury fashion websites are pumping up their e-commerce and mobile offerings. Oscar de la Renta, for one, built exclusivity right into its website with its Backstage Pass, a members-only shopping destination that offers one-off items, private sales, and a boutique “curated” by guest editors.

“The luxury consumer really yearns to have this privileged access,” says Gardner. “They want to be there first, get it first, get …something different than the masses. It’s a combination of being invited and rewarding customers, which I think is important.”

It’s worth keeping one undeniable fact in mind: Social media can disseminate the information, but there are still only an elite few who can afford the high-end goods.

Derek Lam learned this, ironically, when it partnered with eBay earlier this year to create a less-expensive line that was actually crowdsourced: Users were given a selection of different garments and voted on which ones would be produced. Derek Lam’s CEO, Jan Schlottmann, says it was an experiment to see “how we can use the immense traffic and technology of eBay to find out more about our consumer.” Traffic to the company’s website increased, Schlottmann says, and e-commerce sales doubled. But those sales still only made up 1.5 percent of the company’s total—and most of those sales were of discounted items or accessories. “It’s still a harder sell to sell a $1,500 dress online,” says Schlottmann.

Which brings us back to the problem. If brands’ websites and social net offerings are geared toward less-expensive lines, is this hurting their exclusive images? If they don’t decide soon, the people—the bloggers, the tweeters—will decide for them. To quote another rapper, Theophilus London, “The clothes don’t make the man; it’s the man that makes the clothes.”

But maybe the notion that a brand could ever truly own its image was always an illusion. “You can tear magazine ads out, cut them up, paste them on things—they’re interactive,” says MediaLink’s Salomon, “and they reach anyone at a nail salon getting a $15 manicure. What does that say about controlling your message?”